Category Archives: Terrorism Risk

The Bombings in Belgium

If you were allowing yourself to feel a little optimism that the world might be becoming a more peaceful place, with the ceasefire in Syria seeming to hold longer than most analysts ever expected, this week’s harrowing events in Belgium may have dimmed those hopeful glimmers.

The bombings in Brussels underlined once again that the jihadist violence that emanates from this war-torn region is as menacing as ever.

Three bombs went off in the Belgian capital on Tuesday. Two were set off by suicide bombers at the international airport and one explosion ripped through a subway train downtown, close to the heart of the European Union’s headquarters. At the time of writing more than 30 people are dead and more than 300 are injured.

The extremist group which calls itself Islamic State (IS) claims that its followers were behind the attacks. It is waging war in Iraq and Syria and holds significant amounts of territory. It has attracted some Muslims born in the West to join the fight there. It’s when they return home to the West, battle-hardened and with military know-how, that counter-terrorist agencies start to worry. And as events in Brussels this week and Paris in November have shown—with good reason.

The attacks were extremely simple but highly effective. The bombs were detonated in small confined areas, a perfect place for a mass-casualty event when leveraging a small improvised explosive device (IED). The bombs were also reinforced with pellets and nails to further inflict human injury.

Since declaring a Caliphate in June 2014 (a religious term which harks back to the era of the Prophet Mohammed and expresses a desire to unify the global Muslim community under a central leadership), IS has already conducted or inspired nearly 70 terrorist attacks in 20 countries other than Iraq and Syria. This is a harrowing trend that is unlikely to reverse in the short term. Belgium, with the largest number of foreign jihadi fighters in Iraq and Syria in absolute and relative terms, is therefore at considerable risk when these fighters return home.

The bombs blasts in Brussels are a sombre reminder of the difficulty of preventing attacks against transportation infrastructure such as airports and metro or bus stations. As security at military bases, embassies, and other government facilities increases there has been a trend among terrorists to attack softer targets. These locations are vulnerable as by their very nature they must remain open—and with so many such transport hubs it is not easy to detect and exclude those with hostile intentions.

Terrorism inspired by a narrow, extremist interpretation of Islam (particularly the Salafi-jihadi type) continues to pose a major security threat to Western European countries. IS and other such groups view these nations as attractive targets: in particular Belgium, Denmark, France, Germany, Italy, Netherlands, and the United Kingdom. This may be because of their foreign policies, especially those involved in Muslim countries, or because specific events that have caused a strong visceral response among more hard-line elements of the Muslim community.

While it is still early to speculate about the motives behind these attacks, the bombings were likely in response to the capture of Salah Abdeslam in the Brussels suburb of Molenbeek, who’s being held on suspicion of involvement in the November 2015 Paris attacks. There have been several news reports that Abdeslam was plotting additional terrorism attacks in Europe and Belgian authorities were seeking two of his associates. It’s unclear whether those associates were involved in these attacks or if the bombings in Brussels were committed by other extremists. So further attacks in Belgium or regional European countries cannot be ruled out.

The Paris Attack Explained: 7 Points

The suicide armed and bomb attacks in Paris on November 13, 2015 were unprecedented in size and scale. The attacks that killed more than 125 people and left 350 injured have exposed France’s vulnerability to political armed violence and alerted the rest of Europe to the threat of salafi-jihadist within their domain.

The Eiffel Tower was lit in the colors of the French flag in a tribute to the victims. Source: Reuters

Here are seven points we found noteworthy about these attacks:

1. Tragic but not surprising

Though tragic, the Paris attacks do not come as a complete surprise to the counter terrorism risk community.  The terrorism threat in France is higher compared to several other Western European countries. Apart from this recent attack, there have also been several terrorist attacks in France in the last 18 months.  These include the attack on December 20, 2014 in Tours, the armed assault at the ‘Charlie Hebdo’ offices in Paris on January 7, 2015, the shootings in Montrouge on January 8, 2015, the hostage siege at a Jewish supermarket in Paris on January 9, 2015 and an attack against three French soldiers in the city of Nice on February 3, 2015. On August 21, 2015, there was also a terrorist attack on the Amsterdam to Paris high speed Thalys (TGV) train service.

What is surprising is the magnitude and scale of these six assaults.  These attacks were very ambitious. Divided into three distinct groups, the militants were able to execute simultaneous strikes on six locations. Simultaneous attacks are very effective as they cause significant number of casualties before the security services have the time and ability to respond. The attacks were also very well coordinated and involved myriad attack devices reflecting a sophistication that can only come from having some level of military training and expertise as well as centralize control.

2. A well-coordinated attack with unprecedented magnitudes and scale  

In the first series of attacks, three bombs were detonated at locations near the Stade de France, where a soccer match between France and Germany was taking place.  These bombings killed five people. The three explosions at the Stade de France outside Paris were all suicide bombings. One of the attackers had a ticket to the game and attempted to enter the stadium when he was discovered wearing a suicide bomb vest. He blew himself up upon detection. The second suicide bomber killed himself outside the stadium few minutes later while a third suicide attacker detonated explosives at a nearby McDonalds.

Meanwhile at the same time, gunmen reportedly with AK-47 assault rifles opened fire on a tightly packed Southeast Asian restaurant in a drive-by shooting, killing more than 10 people.  Later in the evening there were two other drive by shootings in the different parts of the city that resulted in the deaths of 23 people. Another suicide bomb blast also occurred along the Boulevard Voltaire at a cafe, killing himself but also injuring 15 customers.

The worst violence occurred at the Bataclan Theater, where four militants took hostages during a concert performance by an American rock music group. Witnesses reported that the attackers launched grenades at people trapped in the theater. All the assailants were reported dead after the French police raided the building. Three of the assailants blew themselves up with suicide belts instead of getting arrested, as the police got close while the remaining one was shot and killed by the French authorities.  More than 80 people were believed to be killed at the theatre suicide siege.

3. Chosen strategy offers greatest impact

The suicide armed attacks or sieges witnessed at the Bataclan Theater involved a group opening fire on a gathering of people in order to kill as many as possible.  Similar to the Mumbai attacks in 2008, the ability to roam around and sustain the attack, while being willing to kill themselves in the onslaught, makes such terrorist attacks more difficult to combat. From the terrorist’s perspective, these assaults offer a number of advantages, such as greater target discrimination, flexibility during the operation, and the opportunity to cause large numbers of casualties and generate extensive worldwide media exposure.

It is possible that following the success of Friday’s Paris attacks, suicide-armed assaults and bomb attacks will become an even more attractive tactic for terrorist groups to replicate. Such attacks will typically target people in crowded areas that lay outside any security perimeter checks such as those of an airport or at a national stadium.  Probable targets for such attacks are landmark buildings where there is a large civilian presence.

4. Use of TATP explosives indicates high levels of experience

Also of interest is the terrorist’s use of triacetone triperoxide (TATP) explosives for the suicide bomb vests used in the attacks at the Stadium as well as the Bataclan Theater. TATP is basically a mixture of hydrogen peroxide and acetone with sulfuric, nitric, or hydrochloric acids. These are chemicals relatively available in neighborhood stores.  However, TATP is highly unstable and is very sensitive to heat as well as shock. More often than not TATP will detonate prior to the desired time.  Given the high level of precision and coordination needed to orchestrate these attacks, an experienced bomb maker had to be involved in creating the suicide bomb vest stable enough to be used in these operations.

5. Longstanding ethnic tensions fueled

The Islamic State (IS) has claimed responsibility for the catastrophic attacks in the French capital. While these claims have not been officially authenticated, the suicide operations and the synchronous nature of these attacks are consistent with the modus operandi of salafi-jihadi militant groups such as the IS and al-Qaida.

France’s military incursion in the Middle East such as the country’s recent bombing campaigns against IS positions in Syria and Iraq, justifies its targeting in the eyes of the Salafi-jihadi community. Both IS and al-Qaida linked groups have in the past have threaten reprisal attacks against France for their military intervention in the region.    On the domestic side, the fact the one of the suicide bombers was a Syrian refugee will also further fuel longstanding ethnic tensions in the country. France continues to struggle to deal with the problems of poor integration and perceived marginalization of its large Muslim population. Domestic policies such as the deeply unpopular headscarf ban have contributed to the feelings of victimization claimed by some sections of the French Muslim community.

6. Homegrown terrorists pose a threat

Compounding the threat landscape are indications that many French individuals have traveled to countries such as Syria and Libya to receive paramilitary training. The experience of other Western European countries, which face their own home-grown terrorist threat, has shown that individuals benefiting from foreign training and combat experience can act as lightning rods for local radicalized individuals and provide an addition impetus to orchestrate attacks in their homeland. So far, according to the French authorities it is believe that there is around 400 French citizens in Syria fighting with extremists, making the French among the largest western contingents of foreign fighters in Syria.

7. Potential for subsequent attacks

The November 13, 2015 attacks in Paris, France are the deadliest attacks in Europe since the 2004 train bombings in Madrid, Spain, where 191 people were killed and over 1,800 people were injured.

In regards to the terrorism risk landscape in France, while the suicide bombers have been all killed, the drive-by shooters remain at large. Moreover, despite several arrests in Belgium of individuals allegedly link to the attacks in Paris, it is still unclear whether these detentions have broken up the terrorist network that supported these attacks. Thus, in the short term, subsequent attacks in France or even neighboring countries cannot be discounted.

 

 

Learning More About Catastrophe Risk From History

In my invited presentation on October 22, 2015 at the UK Institute and Faculty of Actuaries GIRO conference in Liverpool, I discussed how modeling of extreme events can be smarter, from a counterfactual perspective.

A counterfactual perspective enables you to consider what has not yet happened, but could, would, or might have under differing circumstances. By adopting this approach, the risk community can reassess historical catastrophe events to glean insights into previously unanticipated future catastrophes, and so reduce catastrophe “surprises.”

The statistical foundation of typical disaster risk analysis is actual loss experience. The past cannot be changed and is therefore traditionally treated by insurers as fixed. The general consensus is why consider varying what happened in the past? From a scientific perspective, however, actual history is just one realization of what might have happened, given the randomness and chaotic dynamics of nature. The stochastic analysis of the past, used by catastrophe models, is an exploratory exercise in counterfactual history, considering alternative possible scenarios.

Using a stochastic approach to modeling can reveal major surprises that may be lurking in alternative realizations of historical experience. To quote Philip Roth, the eminent American writer: “History, harmless history, where everything unexpected in its own time is chronicled on the page as inevitable. The terror of the unforeseen is what the science of history hides.”  All manner of unforeseen surprising catastrophes have been close to occurring, but ultimately did not materialize, and hence are completely absent from the historical record.

Examples can be drawn from all natural and man-made hazards, covering insurance risks on land, sea, and air. A new domain of application is cyber risk: new surprise cyber attack scenarios can be envisaged with previous accidental causes of instrumentation failure being substituted by control system hacking.

The past cannot be changed—but I firmly believe that counterfactual disaster analysis can change the future and be a very useful analytical tool for underwriting management. I’d be interested to hear your thoughts on the subject.

Salafi-Jihadists and Chemical, Biological, Radiological, Nuclear Terrorism: Evaluating the Threat

Chemical, biological, radiological, and nuclear (CBRN) weapons attacks constitute a sizeable portion of the terrorism risk confronting the insurance industry. A CBRN attack is most likely to occur in a commercial business center, potentially generating significant business interruption losses due to evacuation and decontamination, in addition to any property damage or casualties that occur. In the past, there has been a general agreement among leading counter-terrorism experts that the use of a CBRN weapon by a terrorist group is unlikely as these armaments were expensive, difficult to acquire, and complicated to weaponize as well as to deploy. Moreover, with the operational environment being curtailed by national security agencies, it would be a challenge for any group to orchestrate a large CBRN attack, particularly in the West. However, the current instability in the Middle East may have shifted the paradigm of thought about the use of CBRN weapons by a terrorist group. Here are some reasons:

  1. Aspiring Terrorist Groups

The current instability in the Middle East, particularly the conflict in Syria and the ongoing Sunni insurgency in Iraq, has energized the salafi-jihadi groups and has emboldened their supporters to orchestrate large-scale casualty attacks. More harrowing is the fact that salafi-jihadi groups have been linked to several CBRN terrorist attacks. Horrific images and witness accounts have led to claims that local Sunni militants used chemical weapons against Kurdish militants in Syria and security forces in Iraq.


U.N. chemical weapons experts prepare before collecting samples from one of the sites of an alleged chemical weapons attack in Damascus’ suburb of Zamalka. (Bassam Khabieh/Reuters)

CBRN attack modes appeal more to religious terrorist groups than to other types of terrorist organizations because, while more “secular” terrorist groups might hesitate to kill many civilians for fear of alienating their support network, religious terrorist organizations tend to regard such violence as not only morally justified but expedient for the attainment of their goals.

In Iraq and in Syria, the strongest salafi-jihadi group is the Islamic State, which has an even more virulent view of jihad than their counterpart al-Qaida. Several American counter-terrorism experts have warned that the Islamic State has been working to build the capabilities to execute mass casualty attacks out of their area of operation—a significant departure from the group’s focus on encouraging lone wolf attacks outside their domain.

  1. Access to Financial Resources

To compound the threat, the Islamic State has access to extraordinary levels of funding that make the procurement of supplies to develop CBRN agents a smaller hurdle to overcome. A study done by Reuters in October 2014 estimates that the Islamic State possesses assets of more than of US$2 trillion, with an annual income amounting to US$2.9 billionWhile this is a conservative estimate and much of their financial resources would be allocated to run their organization as well as maintain control of their territory, it still offers them ample funding to have a credible viable CBRN program.

  1. Increased Number of Safe Havens

Operating in weak or failing states can offer such a haven in which terrorist groups can function freely and shelter from authorities seeking to disrupt their activities. Currently, the Islamic State has control of almost 50% of Syria and has seized much of northern Iraq, including the major city of Mosul. The fear is that there are individuals working in the Islamic State-controlled campuses of the University of Mosul or in some CBRN facility in the Syrian city of Raqqa, the group’s de facto capital, to develop such weapons.

  1. Accessibility of a CBRN Arsenal

Despite commendable efforts by the Organization for the Prohibition of Chemical Weapons (OPCW) to render Syrian’s CBRN stockpiles obsolete, it is still unclear whether the Assad regime has destroyed their CBRN arsenal. As such, access to CBRN materials in Syria is still a significant concern as there are many potential CBRN sites that could be pilfered by a terrorist group. For example, in April 2013, militants in Aleppo targeted the al-Safira chemical facility, a pivotal production center for Syria’s chemical weapons program.

This problem is not limited to Syria. In Iraq, where security and centralized control is also weak, it was reported in July 2014 that Islamic State fighters were able to seize more than 80 pounds of uranium from the University of Mosul. Although the material was not enriched to the point of constituting a nuclear threat, the radioactive uranium isotopes could have been used to make a crude radiological dispersal device (RDD).

  1. Role Of Foreign Jihadists

The Islamic State’s success in attracting foreigners has been unparalleled, with more than 20,000 foreign individuals joining their group. University educated foreign jihadists potentially provide the Islamic State with a pool of individuals with the requisite scientific expertise to develop and use CBRN weapons. In August 2014, a laptop owned by a Tunisian physics university student fighting with the Islamic State in Syria was discovered to contain a 19-page document on how to develop bubonic plague from infected animals and weaponize it. Many in the counter-terrorism field have concerns that individuals with such a background could be given a CBRN agent and then trained to orchestrate an attack. They might even return to their countries of origin to conduct attacks back in their homeland.

Terrorist groups such as the Islamic State continue to show keen desire to acquire and develop such weapons. Based on anecdotal evidence, there is enough credible information to show that the Islamic State has at least a nascent CBRN program. Fortunately, obtaining a CBRN capable of killing hundreds, much less thousands, is still a significant technical and logistical challenge. Al-qaida in the past has tried unsuccessfully to acquire such weapons, while the counter-terrorism forces globally have devoted significant resources to prevent terrorist groups from making any breakthrough. Current evidence suggests that the salafi-jihadists are still far from such capabilities, and at best can only produce crude CBRN agents that are more suited for smaller attacks. However, the Islamic State, with their sizeable financial resources, their success in recruiting skilled individuals, and the availability of CBRN materials in Iraq and Syria, has increased the probability that they could carry out a successful large CBRN attack. As such, it seems that it is a matter not of “if,” but rather of “when,” a mass CBRN attack could occur.

Redefining the Global Terrorism Threat Landscape

The last six months have witnessed significant developments within the global terrorism landscape. This includes the persistent threat of the Islamic State (IS, sometimes also called ISIS, ISIL or Daesh), the decline in influence of the al Qaida core, the strengthening of affiliated jihadi groups across the globe, and the risk of lone wolf terrorism attacks in the West. What do these developments portend as we approach the second half of the year?


(Source: The U.S. Army Flickr)

The Persistent Threat Of The Islamic State

The Islamic State has emerged as the main vanguard of radical militant Islam due to its significant military successes in Iraq and Syria. Despite suffering several military setbacks earlier this year, the Islamic State still controls territory that covers a third of Iraq and Syria respectively. Moreover, with recent military successes in taking over the Iraqi city of Ramadi and Palmyra, Syria, they are clearly not in a consolidation mode. In order to attract more recruits, the Islamic State will have to show further military successes. Thus, the risk of a terrorist attack to a Sunni dominated state in the Middle East by the Islamic State is likely to increase. The Islamic State has already expanded its geographical footprint by setting up new military fronts in countries such as Libya, Tunisia, Jordan, Saudi Arabia, and Yemen. Muslim countries that have a security partnership with the United States will be the most vulnerable. The Islamic State will rebuke these nations to demonstrate that an alliance with the United States does not offer peace and security.

Continued Decline of al Qaida Core

The constant pressure by the U.S. on the al Qaida core has weakened its military while its ideological influence has dwindled substantially with the rise of the Islamic State. The very fact that the leaders of the Islamic State had the temerity to defy the orders of al Qaida leader, Ayman Zawahiri, and break away from the group is a strong indication of the organization’s impotency. However, the al Qaida core’s current weakness is not necessarily permanent. In the past, we have witnessed terrorist groups rebound and regain their strength after experiencing substantial losses. For example, terrorist groups such as the FARC in Colombia, ETA in Spain, and Abu Sayyaf Group in the Philippines were able to resurrect their military operations once they had the time and space to operate. Thus, it is possible that if the al Qaida core leadership were able to find some “operational space,” the group could begin to regain its strength. However, such a revival could be hindered by Zawahiri. As many counter terrorism experts will attest, Zawahiri appears to lack the charisma and larger-than-life presence of his predecessor Osama bin Laden to inspire his followers. In time, a more effective and charismatic leader could emerge in place of Zawahiri. However, this has yet to transpire; with the increasing momentum of Islamic State, it appears that the al Qaida core will continue to flounder.

Affiliated Salafi Jihadi Groups Vying For Recognition

As the al Qaida core contracts, its affiliates have expanded significantly. More than 30 terrorist and extremist groups have expressed support to the al Qaida cause. The most active of the affiliates are Jabhat Nusra (JN), al Qaida in the Arabian Peninsula (AQAP), al Qaida in the Land of the Islamic Maghreb (AQIM), Boko Haram, and al Shabab. These groups have contributed to a much higher tempo of terrorist activity, alleviating the level of risk.  As these groups vie for more recognition to get more recruits, they are likely to orchestrate larger scale attacks as a way of raising their own terrorism profile. Attacks at the Westgate shopping center in Kenya in 2013 as well as the more recent Garissa University College attack that killed 147 people by al Shabab are two examples of headline-grabbing attacks meant to rally their followers and garner more recruits.

Lone Wolf Terrorism Attacks In The West

The West will continue to face intermittent small-scale terrorism attacks. The series of armed attacks in Paris, France, Ottawa, Canada, and Sydney, Australia in the last year by local jihadists are clear illustration of this. Neither the Islamic State, the al Qaida core, nor their respective affiliates have demonstrated that they can conduct a major terrorist attack outside their sphere of influence. This lack of ability to extend their reach is evident by the salafi-jihadist movement clamoring for their followers to conduct lone wolf attacks, particularly if they are residing in the West. Lone wolf terrorism operations consist of individuals who work on their own or in very small group thus making it difficult for the authorities to thwart any potential attack. While these plots are much harder to stop, their attacks tend to be much smaller in scope.

Germanwings 9525: Why didn’t this happen before?

On the tenth anniversary of 9/11, I attended a commemorative meeting at the British Academy in London. A professor of international relations recounted how he watched the horrific scenes of destruction of the World Trade Center in the company of his five year-old daughter. She posed this intriguing question: why didn’t this happen before?

Just a few years before she was born, in December 1994, Algerian terrorists attempted to fly a hijacked plane into the Eiffel Tower. Fortunately, French commandos terminated the hijacking when the plane stopped for refueling. This was a near-miss. The American writer of counterfactual fiction, Philip Roth, observed in his book The Plot Against America that: “the terror of the unforeseen is what the science of history hides.” The destruction of the Eiffel Tower is not an event in terrorism history—just one of numerous ambitious plots that were foiled.

With the current state of historical and scientific knowledge, there are very few unknown hazard events that should take catastrophe risk analysts by surprise. Almost all either did happen before in some guise, or, taking a counterfactual view, might well have happened before. Take for example the great Japanese tsunami and magnitude 9 earthquake of four years ago. It is doubtful that this was the strongest historical earthquake to have struck Japan. The Sanriku Earthquake of 869 may merit this status, based on archaeological evidence of widespread tsunami deposits.

Disasters are rare, and preparedness depends crucially on knowledge of the past. Aviation is the safest mode of travel; there are very few crashes. However there are numerous near-misses, where one or more of the key flight parameters is dangerously close to the disaster threshold. There is a valuable learning curve associated with the lessons gained from such operational experience.

The direct action of the co-pilot in the tragic crash of Germanwings Flight 9525 on March 24, 2015 raises again the question: why didn’t this happen before? As recently as November 29, 2013, it did. A Mozambique Airlines plane flying from the Mozambican capital Maputo to Luanda in Angola crashed, killing 27 passengers and its six crew. The pilot locked himself in the cockpit keeping out the co-pilot. He ignored alarm signals and manually changed altitude levels.

Quite apart from this and other historical precedents for fatal crashes caused by direct pilot action, there must be many more near-misses, where timely intervention has inhibited direct action by pilots suffering from some psychological disorder. The reporting of incidents is a crucial part of aviation safety culture, so is advancing the learning curve. Analysis of such data would contribute to accident risk assessment and subsequent risk mitigation measures.

The 2015 U.K. Budget and Terrorism Insurance

On 18 March, the Chancellor of the Exchequer, George Osborne, delivered his pre-election budget. Billions of further public spending cuts are needed. Several weeks earlier, Pool Re, the U.K. terrorism insurance pool, announced its first ever purchase of reinsurance in the commercial market.

These two announcements are not unconnected.

Pool Re was set up in 1993, after the IRA bombing of the Baltic Exchange in 1992. Since the pool was established, it has built up quite a substantial surplus; claims have been low thanks to the vigilance of the security and intelligence services. Almost all the major plots since the September 11, 2001 attack have been foiled.

Terrorism insurance is effectively insurance against counter-terrorism failure, and the huge sums spent on blanket indiscriminate surveillance have helped to minimize terrorism insurance losses. The low level of losses is not coincidental, or due to some unpredictable whim of terrorist behavior but readily explainable; too many terrorists spoil the plot. The type of plots capable of causing terrorism insurance losses of a billion pounds or more would involve a sizeable number of operatives.

As the NSA whistleblower Edward Snowden has revealed, the level of surveillance of electronic communications is so intensive that sizeable terrorist social networks end up being tracked by NSA and GCHQ. Lesser plots involving lone wolves or several operatives are most likely to be successful. A string of these have struck the western alliance over the past months in Ottawa, Sydney, Paris, and Copenhagen. Besides causing terror, these have attracted global media publicity, inspiring Jihadi recruitment. But terrorism insurance covers property loss, not the spread of fear or growth in the ranks of Islamic State.

Having developed a tough security environment, it is unsurprising that the U.K. Government should be questioning its continuing exposure to terrorism insurance risk. This is an age of austerity. Pool Re’s three year program provides £1.8bn of reinsurance cover, so diminishing this exposure. More cover might have been purchased, but this was the market limit, given that Chemical-Biological-Radiological-Nuclear (CBRN) risks were included.

The idea of separating out extreme CBRN terrorism risks was considered in Washington by the House Financial Services Committee in the discussions last year over the renewal of the Terrorism Risk Insurance Act. The objective was to provide a federal safety net for such extreme risks, whilst encouraging further private sector solutions for conventional terrorist attacks. This idea was considered at some length, but was a step too far for this TRIA renewal. It might be a step for Pool Re.

The modus operandi of the IRA was to avoid killing civilians. This would alienate their Catholic community support. Bomb warnings, genuine and hoax, were often given. Thus the metric of IRA attacks was typically physical destruction and economic loss. Islamist militants of all persuasions have no such qualms about killing civilians. Indeed, gruesome killings are celebrated. Terrorists follow the path of least resistance in their actions. For Islamic State, this is the path of brutal murder rather than property damage.

Paris in the Winter: Assessing Terrorism Risk after Charlie Hebdo

By Gordon Woo, catastrophe risk expert

My neighbor on the RER B train in Paris pressed the emergency button in the carriage. He spoke some words of alarm to me in French, pointing to a motionless passenger in the carriage. I left the train when the railway police came. A squad of heavily armed gendarmes marched along the platform and within minutes the Châtelet-les Halles station, the largest underground station in the world, was evacuated out of precaution due to the motionless passenger.

This was no ordinary event on the Paris subway, but then this was no ordinary day. “Je Suis Charlie” signs were everywhere. This was Saturday, January 10, the evening after two suspects were gunned down after the terrorist attack against the Charlie Hebdo offices on January 7, the most serious terrorist attack on French soil in more than forty years and the reason for my visit to Paris.

By Olivier Ortelpa from Paris, France (#jesuischarlie) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Fortunately, as a catastrophist, I knew my terrorism history when the emergency arose in my carriage. I always tell my audiences that understanding terrorism—and particularly frequency—is important for personal security, in addition to providing the basis for terrorism insurance risk modeling.

There is a common misconception that terrorism frequency is fundamentally unknowable. This would be true if terrorists could attack at will, which is the situation in countries where the security and intelligence services are ineffective or corrupt. However, this is not the case for many countries, including those in North America, Western Europe, and Australia. As revealed by whistleblower Edward Snowden, counter-terrorism surveillance is massive and indiscriminate; petabytes of internet traffic are swept up in search for the vaguest clues of terrorist conspiracy.

RMS has developed an innovative empirical method for calculating the frequency of significant (“macro-terror”) attacks, rather than relying solely on the subjective views of terrorism experts. This method is based on the fact that the great majority of significant terrorist plots are interdicted by western counter-terrorism forces. Of those that slip through the surveillance net, a proportion will fail through technical malfunction. This leaves just a few major plots where the terrorists can move towards their targets unhindered, and attack successfully.

Judicial courtroom data is available in the public domain for this frequency analysis. Genuine plots result in the arrest of terrorist suspects, indictment, and court conviction. If the evidence is insufficient to arrest, indict, and convict, then the suspects cannot be termed terrorists. Intelligence agencies may hear confidential chatter about possible conspiracies, or receive information via interrogation or from an informant, but this may be no more indicative of a terrorist plot than an Atlantic depression is of a European windstorm. As substantiation of this, there are no plots unknown to RMS in the book of Al Qaeda plots authored by Mitch Silber, director of intelligence analysis at the NYPD.

Since 9/11, there have been only four successful macro-terror plots against western nations: Madrid in 2004, London in 2005, Boston in 2013, and now Paris in 2015. Terrorism insurance is essentially insurance against failure of counter-terrorism. With just four failures in North America and Western Europe in the thirteen years since 9/11, the volatility in the frequency of terrorism attacks is lower than for natural hazards. Like earthquakes and windstorms, terrorism frequency can be understood and modeled. Unlike earthquakes and windstorms, terrorism frequency can be controlled.

My new report, “Understanding the Principles of Terrorism Risk Modeling from the ‘Charlie Hebdo’ Attacks in Paris,” uses the recent Charlie Hebdo attacks as a case study to explain principles of terrorism modeling. And, I will speaking in a webinar hosted by RMS on Wednesday, January 28 at 8am ET on “Terrorism Threats and Risk in 2015 and Beyond.”

Terrorism Modeling 101

Acts of terror can result in wide ranges of potential damage and the financial repercussions can threaten an insurer’s solvency.

Terrorism risk can be modeled probabilistically with an increasing degree of confidence. Its damages at long return periods are comparable to natural disasters such as hurricanes and earthquakes.

The events of September 11, 2001 resulted in insurable damages in excess of $44 billion, causing insurers to explicitly exclude terrorism from standard property policies. This resulted in the downgrade of billions in mortgage securities, and the costly delay of many important development, construction, and infrastructure projects.

The Terrorism Risk Insurance Act (TRIA)

To address the terrorism insurance shortage, the Terrorism Risk Insurance Act (TRIA) was signed into law by President George W. Bush in 2002, creating a $100 billion federal backstop for insurance claims related to acts of terrorism.

Originally set to expire December 31, 2005, it was extended for two years in December 2005, and again in 2007. The current extension, entitled the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA), will expire on December 31, 2014 and its renewal is up for debate in Congress.

Insuring Against Terrorism

Just as with natural catastrophe risk, insurers rely on catastrophe models to underwrite and price terrorism risk.

Terrorism threat is a function of intent, capabilities, and counter-terrorism action; counter-terrorism factors have an impact on frequency, multiplicity, attack type, and targeting of terrorist actions, as well mitigation of loss. It’s not just what the terrorists can do that controls the outcome; it’s what governments can do to counteract their efforts.

RMS was first-to-market with a probabilistic terrorism model and has been providing solutions to model and manage terrorism risk since 2002. The RMS Probabilistic Terrorism Model takes a quantitative view of risk, meaning it uses mathematical methods from game theory, operational research, and social network analysis to inform its view of frequency. Its development involved the input of an extensive team of highly qualified advisors, all of which are authorities in their field of assessing terrorism threats.

The Probabilistic Terrorism Model is made up of four components:

  • The potential targets (comprised of landmark properties in major cities) and associated attack mode combinations (both conventional and CBRN – chemical biological, radiological, and nuclear), knowing that not every target is susceptible to all types of attack modes.
  • The relative likelihood of an attack, taking into account the target and type of attack. For example, attacks using conventional bombs are easier to plan for and execute than anthrax releases; locations having high symbolic or economic importance are much more likely to be targeted.
  • The relative likelihood of multiple attacks making up a single event. For example, a hallmark of many terrorist operations is to attack two or more targets simultaneously. Attack multiplicity modeling is derived based on terrorist groups’ ability to coordinate multiple attacks for a particular weapon type.
  • Event frequency, which is empirically-driven and determined by modeling three input parameters: the number of attempted events in a year, the distribution of success rate of attempted events, and a suppression factor that is based on government response to an event.

The RMS terrorism model’s damage module has been validated against historical terrorism events. All known terrorist plots or attacks that have occurred since the model’s launch have been consistent with our underlying modeling principles. There are blue ocean opportunities for those willing to understand terrorism risk and underwrite it accordingly.

To read more, click here to download “Terrorism Insurance & Risk Management in 2015: Five Critical Questions.”

Western Jihadists & the Risk They Pose to their Homeland

Since the start of the Syrian civil war in 2011, foreign jihadists from across the globe have travelled to Syria to fight the Assad regime. According to a report by the 9/11 commission, the civil war in Syria has attracted around 10,000 foreign fighters from more than 80 countries. A growing number of these foreign fighter contingents have also returned to Iraq determined to reignite sectarian tension in the region. While the majority of non-Syrian fighters are Middle Eastern, the influx of European, American, and Canadian born fighters is significant. A study done by the International Centre for the Study of Radicalisation at King’s College London on the number of foreign fighters in Syria found that 18% are from the West. Britons make up one of the biggest groups of Western fighters with Danes, Italians, and French not far behind.

The news that American Douglas McCain was killed while fighting in Syria also indicates that there are Americans currently in Syria fighting against the Assad regime. In February this year, Director of National Intelligence James Clapper told the US Congress that more than 50 Americans are thought to be fighting in Syria. Canada has also seen a rise in homegrown jihadists going overseas to fight. According to a report done by the Public Safety Canada, an estimated 130 Canadians have joined overseas conflicts, many of them gravitating toward Syria and Iraq to wage jihad. The influx of overseas jihadists is unprecedented. The figures exceed the number of foreign jihadists involved in Afghanistan during its decade of war and its subsequent violent aftermath. Unlike in Afghanistan, many are travelling overseas not to just train or provide financial logistical support, but to also participate in the conflict directly.

There are many reasons why so many individuals have traveled to Iraq and Syria to wage jihad. Many have been drawn in by predictions in a version of Islamic ideology that the apocalypse will take place in Greater Syria. Such narrative has been inflamed by stories of atrocities against Sunni Muslims alleged to be committed by the Alawite Assad regime.

Accessibility is also a factor. In contrast to other jihadi theaters such as in Afghanistan, Mali, and Somalia, Iraq and Syria are much more logistically accessible. Europol reports that many foreign jihadists have traveled through Turkey, a common vacation destination, which arouses no or limited suspicion. Most of the foreign jihadists have been assimilated to ISIL, also referred to as ISIS (Islamic State of Iraq and Syria), but not exclusively. Some have joined other salafi-jihadi rebel groups such as the Jabhat al-Nusra and Ahrar al-Sham.

These groups were founded by individuals who at one time were senior members of al-Qaida. They tend to be more inclusive, highly organized, and much better financed than their more moderate counterparts such as the Free Syrian Army (FSA). The foreign fighters are not only getting indoctrinated ideologically, but are also given training on operational tactics. Many are instructed in using improvised explosive devices (IEDs), car bombs, and suicide attacks.

From a threat perspective, foreign jihadi involvement in both Iraq and Syria could impact the global terrorism risk landscape in multiple ways. First, the returning jihadis potentially could revitalize their cause in their homeland and act as a conduit reconnecting local groups to the global jihad. Second and more importantly, there is also a risk that some of these veterans may attempt a terrorist attacks back in their homeland. While the majority of jihadist foreign fighters do not end up attacking their home countries, a small number do and they often prove more capable and proficient than those without any fighting experience.

Given the stronger counter terrorism environment in the West, such attacks will more likely fall under the category of lone wolf terrorism attacks. These are individuals who work alone or in very small groups and do not seek any type of external assistance to execute their operation thus making it difficult for the authorities to gather enough intelligence to thwart any potential attack. Returning jihadists with proficiency in the local language and the ability to understand Western society can execute and plan their terrorism plot without raising much suspicion. While these homegrown lone wolf plots are much harder to detect and stop, their attacks tend to be limited to smaller attack types.

Current counter-terrorism practitioners assert that ISIS and its foreign contingent are interested in attacking western cities but question whether they have the ability to orchestrate a large-scale attack such a car bomb in cities such as in Toronto or London given the strong counter terrorism environment in these cities. Thus, it appears lone wolf attacks such as assassinations, beheadings, and kidnappings are the more likely scenarios. Despite these changes in the global terrorism landscape, RMS continues to recommend clients to use the standard risk outlook for its suite of probabilistic terrorism models.